By Leah Schnurr
OTTAWA (Reuters) – Canadian housing starts dipped last month as groundbreaking slowed in British Columbia, data released on Wednesday showed, which could ease concern that the western province’s property market is overheating.
Even with the small decline, national housing starts remained solid at a seasonally adjusted annualized rate of 188,570 units in May from 191,388 in April, the report from the Canadian Mortgage and Housing Corp said.
May’s figure was slightly short of economists’ expectations for 190,000 units.
The decline was led by fewer multiple starts in urban areas, including Toronto, CMHC’s Chief Economist Bob Dugan said.
Groundbreaking also declined in Vancouver. The country’s two biggest cities have seen housing activity accelerate even as other areas have slowed due to an oil price shock, raising worries that Toronto and Vancouver could be in for a correction.
The slowdown in both cities in May were due to a decrease in construction of multiple units, which include condominiums, a particular source of concern for those worried about a housing price bubble.
Following recent calls for policymakers to do more to contain the housing market, Finance Minister Bill Morenau told an economic conference in Toronto on Wednesday that the government was “looking at all evidence” as it considers whether it needs to act again to tighten mortgage regulations.
The Liberal government raised the minimum down payment on more expensive homes last year, shortly after it was elected.
Starts in urban centers in British Columbia declined to 35,312 units, while they edged up slightly to 64,918 units in Ontario as a whole, despite the dip in Toronto, the provincial capital. The damping effect of cheaper oil continued to be felt in the commodity-sensitive prairie provinces, with starts declining.
“The key themes in Canadian residential construction remain tucked well below the national surface,” Robert Kavcic, senior economist at BMO Capital Markets, wrote in a note.
“That includes regional shifts in the wake of the oil price shock, and ongoing densification in Toronto and Vancouver.”
Kavcic said May’s figure puts the five-month average for 2016 at just under a 195,000 annualized pace, roughly in line with household formation.
Separate data from Statistics Canada showed the value of building permits issued in April fell for the second month in a row on lower construction intentions in Ontario.
Building permits were down 0.3 percent, missing forecasts for a 1.5 percent gain after March’s 6.3 percent decline. April marked the first time since February 2015 that permits had dropped for two consecutive months.
(Additional reporting by David Ljunggren in Ottawa, Andrea Hopkins in Toronto; Editing by Alan Crosby)